On Monday we looked at EBITDA margin trends via the recently updated competitive telecom trends graphs. Today let’s look at capital expenditures for network operators of all types to see whose spending on new projects is up and whose is down. In the following plot of trailing-12-month capex you can see that overall, spending is definitely up.
Relative TTM Capex Trends for Competitive Network Operators
Of the 11 competitive operators for whom I have data, spending has been consistently up for the last 4 quarters for eight of them. Zayo’s TTM capex has risen from the mid 30%s up to 40% for the first time in their history, reflecting perhaps those new intercity builds they have added to their usual metro footprint expansion. But it’s not Zayo who has been spending the largest percentage of revenues on buildouts in the last year or two, that crown sits on the head of Lumos Networks. Lumos has been transitioning from older CLEC and ILEC revenues to fiber infrastructure, and it’s only when you look at this plot that you see just how much of their money they are putting where their mouth is and why they raised some cash from private equity this year. And over in Europe, euNetworks’ ttm capex has risen above 30% once again.
Also steadily increasing capex, albeit less dramatically, are Windstream and Level 3. Windstream’s spinoff of CS&L has if anything led to a bit more aggressive network expansion activity, while at Level 3 the higher capex at tw telecom added a bit more each quarter. GTT has a low capex model, but the acquisitions they’ve made over the last year have definitely shifted their capex a bit higher as a percentage of revenue. Broadview’s trend is slightly up, as is Sprint’s – though in that case it’s a case of revenue declining with capex not following.
So who is spending less than they did in previous years? Cogent Communications has tightened its capex purse strings somewhat. They are still bringing a few dozen multi-tenant buildings on-net every quarter, so the reduction probably reflects fewer intercity dark fiber IRU expansions. They had been adding reach steadily for a long time, but are now perhaps in most of the markets they want to be in. EarthLink’s capex has been trending downward as they refocus their business. And the other network operator whose capex has been trending downward of late is LightPath — although they’re still in the high 20%s. With more than 7,000 on-net buildings in the New York City metro area, perhaps LightPath is starting to run out of targets of the same level of opportunity. Holding remarkably steady is Consolidate Communications.
But the overall trend for capex as a percentage of revenue by competitive network operators in 2015 was definitely upwards.
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